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Children and Wealth

Jul 24, 2011 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Households • 208 Views    No Comments

More wealth seems to mean fewer children. Look at a graph of fertility in the U.S from 1800-1990. The birth line plunges. Consider India, China, South Korea, Singapore. As per capita GDP rises, births plummet. See this gapminder graph for rich countries and poor countries. The number of children per woman is much less in more affluent nations.

1977 was a turning point in the U.S. Before, a majority of Americans told Gallup pollsters that they preferred 3 or more children. After, the number declines to 2. Gallup also tells us that currently, families earning more than $75,000 annually are more likely to want smaller families than lower income households. Here, you can see the Gallup information.

Here and here you can see most of the family size trends discussed.

The Economic Lesson

An economist would call a good, “normal,” if your demand for it increases when your income rises. By contrast, for “inferior” goods, our demand decreases when we earn more. Dinners at nice restaurants are normal goods. Used cars are “inferior” goods.

Does that mean that children are “inferior” goods if more affluence means less? Here, economist Justin Wolfers explains why.

An Economic Question: During the great recession, how did consumers’ demand curves shift for normal and inferior goods? Examples?

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